Alcoa 2015 Annual Report Download - page 93

In March 2015, Alcoa completed the sale of a rolling mill located in Belaya Kalitva, Russia to a wholly-owned
subsidiary of Stupino Titanium Company. While owned by Alcoa, the operating results and assets and liabilities of the
rolling mill were included in the Global Rolled Products segment. The rolling mill generated sales of approximately
$130 in 2014 and, at the time of divestiture, had approximately 1,870 employees. See Restructuring and Other Charges
in Results of Operations above.
In February 2014, management approved the permanent shutdown of Alcoa’s two rolling mills in Australia, Point
Henry and Yennora. This decision was made due to the significant impact of excess can sheet capacity in both
Australia and Asia. The two rolling mills had a combined can sheet capacity of 200 kmt-per-year and were closed by
the end of 2014. See Restructuring and Other Charges in Results of Operations above for a description of the
associated charges.
In December 2014, Alcoa completed the sale of three rolling mills located in Spain (Alicante and Amorebieta) and
France (Castelsarrasin) to a subsidiary of Atlas Holdings LLC. While owned by Alcoa, the operating results and assets
and liabilities of the rolling mills were included in the Global Rolled Products segment. In conjunction with this
transaction, Alcoa entered into a multi-year agreement with the buyer to supply aluminum for the rolling mills. The
rolling mills combined generated sales of approximately $500 in 2013 and, at the time of divestiture, had
approximately 750 employees. See Restructuring and Other Charges in Results of Operations above.
Third-party sales for the Global Rolled Products segment declined 15% in 2015 compared with 2014, primarily driven
by the absence of sales ($1,052) from six rolling mills in Australia, Spain, Russia, and France (see above), unfavorable
pricing, mostly due to a decrease in metal prices (both LME and regional premium components), and unfavorable
foreign currency movements, mainly the result of a weaker euro, Russian ruble, and Brazilian real. These negative
impacts were somewhat offset by increased demand of the remaining rolling portfolio and favorable product mix
(automotive and aerospace versus industrial products). The volume improvement of the remaining portfolio was
largely attributable to the automotive (North America) and can sheet packaging (China) end markets, slightly offset by
lower demand in the industrial products end market.
Third-party sales for this segment improved 3% in 2014 compared with 2013, principally caused by increased demand,
somewhat offset by unfavorable price/product mix related to the packaging, aerospace, and industrial products end
markets. Volume improvements were mostly driven by the automotive and commercial transportation end markets.
ATOI for the Global Rolled Products segment decreased $1 in 2015 compared with 2014, primarily attributable to
unfavorable price/product mix, largely the result of overall pricing pressure in the global can sheet packaging end
market, and higher costs related to growth projects, including research and development as Alcoa develops and
qualifies products from a new Micromill™ production process and the ramp-up of the Tennessee automotive
expansion. These negative impacts were virtually offset by net productivity improvements across most businesses and
higher volumes of the remaining rolling portfolio, principally driven by higher demand in the automotive end market.
ATOI for this segment declined $47 in 2014 compared with 2013, mainly the result of unfavorable price/product mix
related to the packaging, aerospace, and industrial products end markets; higher input costs, including energy, labor,
maintenance, and transportation; a larger equity loss due to start-up costs related to the rolling mill at the joint venture
in Saudi Arabia; a write-off of inventory related to the decision to permanently shut down the Point Henry and Yennora
rolling mills ($9); and costs (business continuity and contract specific) related to a new labor agreement that covers
employees at three rolling mills in the United States ($4) (see COGS in Results of Operations above). These negative
impacts were partially offset by net productivity improvements across most businesses and overall higher volumes.
In 2016, demand in the automotive end market is expected to remain strong and the automotive expansion at the
Davenport, IA facility will operate at full capacity for the entire year while the automotive expansion at the Tennessee
facility will continue to ramp-up, both of which will serve the growing demand for aluminum-intensive vehicles. Also,
costs related to the ramp-up of the Tennessee facility and the previously-idled casthouse in Texarkana, TX, as well as
for preparations to run the Warrick, IN rolling facility on cold metal as a result of the planned closure of the Warrick
smelter (see Primary Metals above), are expected. Additionally, net productivity improvements are anticipated.
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